How Important is Luck in Entrepreneurship?
It’d be hard to argue against the existence of luck. Luck is simply too prevalent in our understanding of how things work. We accept the existence of it and some degree of influence that luck has over everything in our lives.
But luck irks me.
It’s too often used as an excuse when things go wrong or an explanation when things go right.
“That was just lousy luck that your business crumbled. I’m sure it had nothing to do with incompetent C-level management and overspending. Just bad luck!”
“Sure you sold your company for $20 million, you’re one lucky guy! It had nothing to do with having a great idea and executing beautifully and being ultra-strategic on who you built relationships with. I tell ya, all luck!”
People need to experience, live through and survive both positive and negative events. If you only experienced positive, “lucky” things you would never grow the same depth of character and vision. At the same time if you use luck as a crutch, you’re stuck.
If I’m going to believe in and focus on unknown forces, I’d much rather but stock in karma. Karma can still serve as a crutch, but it’s based on the concept that we can change it. Do good, and good things happen. Do bad, and bad things happen.
But almost every entrepreneur (successful or not) will tell you luck is involved.
I just can’t decide how much. Some say entrepreneurship is 50% luck. When I was designing the perfect entrepreneur, I pegged luck at 8%.
How about I leave it to you to decide…
I recently heard serial entrepreneur Michael Doernberg speak and he flatly stated that success as an entrepreneur is luck and all you can do is improve your chances. (I posted other notes from his talk here, in case anyone is interested.)
My interpretation of this is that luck may be a significant component of success, but not something you should rely on as an entrepreneur.
You need to work hard to get lucky as Thomas Jefferson said in one of my favorite quotes: “I find the harder I work the more luck I seem to have.”
Ben, I often wondered what the ratio would be, is it 50/50. I would say it’s an 80/20 rule. i.e. it’s 80% sweat and hard work to give you a shot at getting the 20% luck. Without the former, there is no crack at the latter.
Josh – how can you improve your chances with luck though, that’s the part that gets me. Luck is not determined by anything – that’s why it’s luck.
Karma is determined by other factors; so you could legitimately help your chances by improving your karma.
The same holds true with the Jefferson quote – “work hard to get lucky?” – What about lazy people who win the lottery?
It just doesn’t hold up.
I wonder if people like that are using luck as an excuse but what they’re really saying is, “I’m just plain out smarter and better than you are…” (not you, just speaking in general terms.)
Vernon – thanks for the comment. I don’t know, I’m struggling with this one a lot. Work hard to get lucky…lots of people are lucky who don’t work hard – are the two really linked? Or are they only linked when someone succeeds and claims luck as a factor?
You either have a good idea or not. You either execute well or not. Right? No? Maybe? *grin*
Dear Ben,
‘luck’ the word is a misnomer, and the concept itself is regarded as something totally exterior to the individual when it isn’t, and that’s why it is confusing or difficult to understand.
I could go so far as to say ‘there is no luck’, but in some events, with hindsights, one would still use the same word as we don’t really have another one. Some people use ‘coïncidence’, ’serendipity’, ’synchrony’, ‘resonance’, or other words.
What happens in reality is that opportunities for great things abound, but individuals’ personal worldviews differ.
Hence, their abilities to recognize these opportunities are also different.
For the same event, one will lament to no end, where another will find something positive that can lead to an opportunity.
Moreover, even if two individuals recognize the same opportunities, one may take little or no action (and come to nothing), the other may take massive action and risk and succeed.
There is no such thing as luck or coïncidences in the sense as we understand them traditionally.
Rather, these have an effects over recognizing opportunities or not:
- the events you’ve been through in the past, and what emotions are strongly related to them
- people who surround and how they communicate with you
- how you communicate to yourself internally, vocabulary and whether it’s positive or negative
- Your personal language helps model your personal worldview
- Your personal worldview isn’t the world
A person who tells himself that opportunities abound and reinforces the belief will be more alert or open to new opportunities and more likely to find them and act on them.
Somebody who is in a spiral of negative personal communication and worldview is blinded to opportunities.
This all has to do with the psychology of success. Successful people and organizations have traits or beliefs which enable them to be more successful.
These traits are not shared by unsuccessful people.
Have you seen anybody who is considered to be ‘lucky’ (i.e. one who seems to win everything etc…) also be globally negative or sad?
No, and the actual cause and effect relationship is blurred because it is a feedback loop.
Best,
Josh
Ben,
I think what working hard to get lucky just means you increase your chances for luck by more often being in situations where you can get a lucky break. If you haven’t started a company, how can you get lucky selling it to Yahoo, for example? Sure, someone can win the lottery being lazy, but the chances are so low. It takes lots of hard work to be in position to get lucky very often.
Josh
Josh N. – what you describe isn’t luck, it’s being smart, believing in yourself and being positive. That’s not luck.
Josh C. – I see your explanation as “you increase your chances for SUCCESS by more often being in situations where you can be SUCCESSFUL.”
If you haven’t started a company, you can’t sell it to Yahoo. But if you have started a company is it luck that gets it sold to Yahoo or a strategy designed TO sell it to Yahoo?
How are the chances low of winning the lottery if you’re lazy? Granted, you have to go 2 or 3 times / week to buy lottery tickets – that doesn’t quite constitute non-laziness.
I’m not trying to be argumentative / negative in any way – I hope you guys are enjoying the discourse – but I’m tempted to say “screw luck.”
“You make your own luck,” has some ring of truth to it – but to me that’s just “you make your own success.”
Exactly Ben, I believe there is no such thing as ‘luck’ as it’s traditionally understood. People who are deemed ‘lucky’ by others have traits which enable them to see opportunities better and convert them into wins easier than others. That’s all.
The traits and the beliefs are already well-known.
In business-speak:
A company which has started and which ‘communicates’ its potential benefits to Yahoo in the case of an acquisition has more chance of being acquired by Yahoo than just an idea. So yes, you can design your success this way. Knowing what you want will help you get what you want.
“you make your own success” – Yes, that’s it.
Some people say “if you believe you can, then you can. If you believe you can’t, then you can’t”. It took me some time to understand why this is true but I believe it now.
Ben,
Yeah I can see it the way you put it too, but my impression is that many successful entrepreneurs would still differentiate between making your own success and what they would call being lucky.
Continuing with the Yahoo example, if you have worked hard to build a good startup and then you happen to run into some Yahoo VP at a conference, well most people would consider that very lucky. Maybe they would have bought your startup a year later anyway, but maybe the seed you planted is what caused him to start noticing your startup and mentioning it to others. It took hard work to start the company, it even took hard work to go to whatever conference with your well-practiced pitch, but luck can play a big role in such opportunities.
I think entrepreneurs look back at the some fortunate connection they made or their first big sale they could have easily lost to a more-established competitor and attribute it to luck. It’s not something you can rely on, so hard work is the name of the game, but sometimes results are simply better than hard work alone would have predicted.
That’s my opinion at least. Good discussion.
I’ve built a few companies, and each one of them had fortunate elements “align” in a way that I could have never planned. Call it luck I guess, but beyond the luck was my requirement to make the most of the luck that came my way. So, my opinion that successful companies need a lucky series of events to align, but that alone will never amount to anything. Ultimately its about executing on your luck. Great post, by the way…
Ben,
I’ve spent 10 years researching and speculating on asset markets, so I know a thing or two about luck. But first a quote from a guy I went to university with :
“99% of companies don’t make money, and it’s pot luck if you do make money.”
That comes from Mike Danson, CEO of Datamonitor. Datamonitor are fast becoming a rival to Reuters, so they should know a thing or two about business. And is Mike’s view born of sour grapes? Hardly: in May of this year (07), he sold the business he built from scratch for £513million in cash.
You say you don’t like “luck” cos you can’t affect it. But, as The Bard well recognised, “outrageous fortune” is something to be suffered, not overcome. You seem to suggest that it is human to accept defeat, as if it were the easy option, when in fact a more human response to life is to seek meaning. For life to be meaningful we need cause and effect, not luck, and when life is done we need a pat on the back from an imaginary god, or, dare I say, a chance to do it all again but in an enhanced form : yep, I’m afraid your preference for “karma” over “luck” is touching but delusional nonetheless!
I believe when entrepreneurs speak of luck, they are also talking about humility. Fact is, there are probably many companies, more than a few of them good that have “a strategy to sell to Yahoo” and do not achieve that.
I don’t often hear people use “bad luck” as an excuse for their failures. I do hear people who have worked hard use it to remind other people – and themselves – that many other people who are just as smart, just as hard working, or had just as good an idea didn’t sell to Yahoo because they weren’t the one that happened to meet the right connection in the restroom that day.